Implementing of ABC is unlikely to be cost effective when variable production cost are in low proportion of total production cost. This statement is true because variable production cost are lower than than fixed cost so it making savings beacuse variable cost ( direct cost) are greater than overheads.
If fixed cost are more than variable cost it will not be cost effective ..
Sir is this statements right ???
Thank you in advance
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PMActivity based costing
6y agoits false statement, because we variable cost are in bots same, but in ABC we only recalculate the ovher head (Fixed Production) Cost. and we save some cost per unit because of the cost drivers. so the more the fixed cost the more accurate the ABC.
Thank you
Disadvantages of ABC:
- if overhead cost is the small proportion of the overall cost then ABC will not give the significant benefit.
6y ago#3Thanks dear..
God bless u always
6y ago#4You are welcome :-)
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